Andres Oppenheimer is the author
of Bordering on Chaos, a book detailing politics and corruption in
Mexico. He is the senior Latin American correspondent for the Miami Herald
and co-winner of a Pulitzer Prize for his reporting on the Iran-Contra
scandal.

CARLOS SALINAS'S BEGINNINGS..... HOW DID HE COME TO POWER?

Carlos Salinas came to power in probably the most dubious election in
recent Mexican history. It was an election that the opposition said was won
with fraud. There were riots on the street. The opposition, the
leftist opposition candidate who at the time said he had really won the
election,
staged riots all over the place, they said it was a fraudulent
election.

YOU SAY THE 1988 ELECTION WAS A CORRUPT ELECTION, A RIGGED ELECTION. GIVE ME
AN EXAMPLE.

The 1988 elections were the most dubious one in recent Mexican history.
After the voting the counting was stopped. Later the ballots
were burned. The opposition said he had won, the government said
it had won. Nobody knew what was going on.

BUT CARLOS SALINAS WON.

In the end the government put out a statement saying that Carlos
Salinas had won the elections . . . So Salinas came into power as a pretty weak
president. He needed support and to get that support he went to the three
places that
previous governments had sort of kept at a distance: the U.S. government,
the Mexican Roman Catholic church and the military and those
were the sort of three pillars on which he built up his presidency in the
years to come.

AND THIS HAD NEVER BEEN DONE BEFORE?

Well you see, previous Mexican presidents had built their entire
ideological and political apparatus on the concept of nationalism. So they
kept the army at arm's length, they kept the church at arm's length and
more than anybody else, they kept the U.S. at an arm's length. Salinas
changed that all in part because of political needs, because he needed a new
source of support.

WHY EXACTLY DID HE JUST CHANGE THE WHOLE STRUCTURE AROUND?

Well we have to keep in mind that when Salinas took office,
Mexico was deeply, deeply in debt. It owed $98 billion to foreign banks. So
Salinas needed to do something and what everybody was telling him to do and
what he had to do and what he did was open up the economy. So he sold
state owned companies to the private sector, got the money and used that
money to pay off Mexico's debts and get the country back on its feet, and he
did it and quite successfully.

WAS HE BEING DICTATED TO, OR WAS HE HIS OWN MAN ON THIS? WAS HE HIS OWN
VISIONARY?

Well there is a beautiful anecdote that one of his aides told me when
President Salinas went to Davos, Switzerland to a world economic summit; it
was
in 1990 and he went there to sell, to try to attract investments to his
country. He was at his office in his room in Davos trying to give his speech,
trying to attract foreign businesses and foreign investments in Mexico and of
course at the same meeting were the Russians and the Poles and all these
countries that had just left behind
communism. And Salinas found that nobody was paying attention to him.
The Wall Street and European investors were in a neighboring
room listening to the Russians and the Hungarians and the Poles were doing.
That's where the action was. And he found himself, according to what his
aides told me later in a virtually empty room with very little interest for
investors, and no press. When he came back to Mexico he told one of his close
aides who told the story to me that what he had been doing at the beginning
wasn't working. He needed to do something bolder, he needed to do something
quick and he soon did it and that was to begin laying the ground for the North
American Free Trade agreement.

DO YOU THINK THAT WAS HIS BIGGEST CLAIM TO FAME?

I think that NAFTA will remain Salinas's biggest claim to fame in the good
sense. I mean he did many good things and many bad things. That's certainly one
of the things he did that will remain in place.

AND CAN WE SEE THE EFFECTS OF THAT FREE TRADE AGREEMENT NOW IN MEXICO? ARE THE
RESULTS OF THAT AGREEMENT OBVIOUS?

From a macro economic point of view yes, NAFTA has been good for Mexico.
The trouble is it has only been good for a very small minority of Mexicans.
Virtually the entire portion of the big jump in Mexican exports to the U.S.
is concentrated in perhaps 10, 15, or 20 big Mexican companies. It hasn't
trickled down to the people yet. So micro economically, NAFTA
has been a big boon to the Mexican economy. But it hasn't trickled down to
the people and it hasn't trickled down to all regions of Mexico because
what we are seeing now is that most foreign investors are setting up their
manufacturing plants in northern Mexico which is the industrial,
the most developed part of Mexico and very few are doing it in
the southern part of Mexico where the Indians live, where you have higher
levels of illiteracy and a rural, peasant society.

WAS THIS PART OF CARLOS SALINAS'S PLAN? DID HE HAVE IT IN MIND TO GIVE THE BIG
DEALS TO A CERTAIN PERCENTAGE--THE RICH BUSINESSMEN?

No of course not. I think Carlos Salinas wanted to turn Mexico,
as he said publicly, into a first world country and to do that he opened
up the economy. But when we are asking ourselves about his motivations, we have
to look back in history. Carlos Salinas, as most of the young people of his
generation, grew up with socialist ideas. His brother Raul flirted for a while
with Maoism, he went to the southern states, he worked with the Indians. He was
a socialist revolutionary,
quote, unquote organizer. And Carlos Salinas pretty much was in
that same circle of friends. Then he goes to Harvard, he goes to the U.S.
When he took office - I'm not sure that he planned to do what he later
did. When he took office, he probably did not plan to open up the economy
to the extent that he later did. But because of the circumstances of the
moment --the weakness of his presidency because of the
allegations of fraud in the elections which took him to power,
and because of his experience in his early failures in trying
to attract foreign investments into Mexico-- by 1990-91 he took
a big turn and went ahead with revolutionary measures like
privatizing 18 banks which had been nationalized in 1982 by a previous
president, like starting to talk about a free trade agreement with Mexico.
He did that about two years into his presidency.

SO PRIVATIZATION WAS A POLITICAL MOVE ON HIS PART TO BUILD UP HIS OWN BASE OF
SUPPORT.

It was a decision made out of need to bring in money to pay off Mexico's
foreign debt and I think because Salinas, at that point, was convinced
that there was no other way to go.

TELL ME MORE ABOUT THE PRIVATIZATION. WOULD YOU SAY THAT IS ANOTHER DISTINCTIVE
MARK OF SALINAS?

Carlos Salinas privatized about 300 state owned companies. He did it in
part because he needed to sell off public companies to get money
to pay Mexico's huge foreign debt. He did it in part because Mexico needed
to open up the economy, to attract foreign investment. And he
did it in part because these state owned companies were sort of
the cells or the focus of corruption in Mexico. These were the companies where,
you know, ruling party bosses ruled at their will and committed all kinds of
things that were no longer well viewed all over the world. And if he wanted to
bring the U.S. into a
free trade agreement, he could not afford to have these political party
bosses with their pockets full of government money running around doing all
kinds of crazy things.

SO HE WAS DOING IT FOR THE RIGHT REASONS?

I think he did it for the right reasons. I think he didn't have much of a
choice. Mexico needed money to pay its huge foreign debt. That's the thing
people keep forgetting about. When Salinas took office, it was not that he has
this vision or this ideological urge to become a crusader for free trade. He
took office and he found himself with a huge foreign debt, a $98 billion
foreign debt. Where was he going to get the money from? The only way, the
quickest way to get the money --considering that the bankers wouldn't lend more
money to add more good money to the bad money that they had already lent-- the
only way he could get that money was from selling inefficient and very badly
managed state owned companies and he did it.

AT THE SAME TIME, HE SEEMS TO BE THUMBING HIS NOSE AT HISTORY.
SINCE THE REVOLUTION MEXICO HAS BEEN A VERY NATIONALISTIC PLACE, A PLACE THAT
HAS BEEN VERY INTENT ON KEEPING WHAT IS THEIRS, THEIRS AND KEEPING ESPECIALLY
THE U.S. AND OTHERS OUT. HOW DID HE MANAGE THAT?

He was very smart. He had a very good and efficient management of the foreign
press. And the way he managed it mainly is by what I would call a boomerang
effect. He seduced the Washington powers that be - the president, President
Bush, later President Clinton, the U.S. Congress, Wall Street, the American
press and that boomerang of Mexico and suddenly the Mexicans on the streets
opened up the daily papers and said, President Bush says wonderful things about
President Salinas; President Clinton says wonderful things about President
Salinas. The big New York-Washington papers praised Salinas. The Wall Street
brokers praised Salinas and the Mexican people said hey, if this guy gets these
kinds of reviews in Washington and Europe, he can't be that bad. So he created
this
atmosphere and for a while it was legitimate praise because he did things that
were necessary and that no other president in recent years had done and that no
other Mexican president in recent history had had the guts to do.

AND SO HE HAD BOTH THE U.S. AND HIS OWN PEOPLE ON HIS SIDE IN A
SPACE OF A COUPLE OF YEARS.

Whatever the Mexican people will tell you now, the fact is that by the end
of his presidency before the collapse, he was one of the most popular
presidents in Mexico history. People respected him. I remember driving in cabs,
talking with people on the street and people respected him. And when I asked
people,
hey but isn't he building a free economy on a pretty backward political
system, they sort of waved that off. They said, well yeah but
you know, things will come, and that was his big mistake.

EXACTLY WHAT WAS HIS BIG MISTAKE?

His big mistake was building a free open market economy with backward,
corrupt political system of which he was part.

AND HOW COULD YOU DESCRIBE THAT SIMPLY, THAT CORRUPT POLITICAL
SYSTEM? HOW DOES IT WORK?

Well, the Americans come to Mexico and see a free press and a
semi-free press and see people speaking out and what you see in Mexico
today is a pretty open society. Definitely much more open and
much more democratic than it was 10, 15 years ago. There's no question
about that, but there are still mechanisms of political control
with which the ruling party manages to win elections or to do better than
it would have in a level playing field.

PERHAPS YOU COULD GIVE ME AN EXAMPLE OF THE POLITICAL SYSTEM YOU'RE
ALLUDING TO WHICH HAS BEEN IN PLACE SINCE THE REVOLUTION, IS THAT RIGHT?

Do you want me to tell you an anecdote? Let me tell you a story. A few days
before the 1994 election, I went down to the streets and looked for a shoe shiner
who I knew. And
he wasn't there and neither was any other shoe shiner in downtown Mexico. I
couldn't find any. So after the elections, I went to the one I knew and I
asked him where had he been. And he said, oh well for the elections and the
week before, we had all - we all were summoned to go to the
ruling party rallies, political rallies for the presidential campaign. So I
told him, come on, you're not a pro-government type. Why did you
go? So he explained me how it works. If you're a shoe shiner in Mexico City,
you need a license. To get that license you have to go to the shoe shiners
union which is tied
to the ruling party. So when you get that license, along with it you get a
credential which makes you a member of the ruling party. So you've got social
benefits, you get free lunches, you get free uniforms, you get a free burial
when you die. You get all kinds of benefits but on the other hand, you're
required to attend ruling party meetings. That's why
when you go to a . . . a political rally, you see tens of thousands of people.
So I asked him, well what happens if you don't go? And he says, well you have
to go because when you go you get a little stamped ticket that says that you
have attended the political rally.
And the next day when you go to work to your corner an inspector passes by and
if you don't show your receipt, your stamped piece of paper, you're suspended
for three days. So the system still has mechanisms of political control which
are not visible. They're traces of old times, you know, dirty, authoritarian
mechanisms of political control in a society that indeed has become much freer
and much more open.

IS THE SHOE SHINER PART OF THE CORRUPT POLITICAL SYSTEM YOU'RE TALKING ABOUT?

Mexico has become a more open society in recent years but it is still an
authoritarian democracy.

AND WHY DID SALINAS NOT BOTHER TO LOOK INTO THAT?

Because he had seen what was happening in the Soviet Union and he reached a
conclusion that it would be best for him to do perestroika first and glasnost
later, to do the economic reforms first and the political reforms later. He
felt he needed
to have a political system in place to get the support in congress and in
public opinion to push through his economic reforms. But that turned out to
be
his big mistake as he is now recognizing because the very people who he had
around him were, in the end, defending political interests which
were not necessarily democratic or free enterprise.

AND YOU REALLY BELIEVED HE WANTED TO EMBARK ON THOSE
POLITICAL REFORMS?

I think once he plunged into the economic reforms and he began to realize
the praise he was getting overseas, in the U.S. especially, he sort of became
convinced of his own rhetoric and his own plan to open up the economy.

BUT THIS IS THE MAN, TO COME BACK TO PRIVATIZATION, THAT DID SELL OFF MANY OF
THE STATE MONOPOLIES TO SOME OF HIS FRIENDS WHO HAPPENED TO
BE THE RICHEST PEOPLE IN MEXICO, ISN'T THAT RIGHT?

The trouble with Salinas's privatization plan was that he did indeed sell
inefficient, old, corrupt, state owned companies, but he sold them in the
end to a small clique of friends. What you wound up with was a transfer of
power from old, corrupt party bosses to new, in some cases corrupt, private
sector bosses.

SO HE WASN'T REALLY INTENT IN CLEANING UP THE CORRUPTION IN THE OLD SYSTEM. HE
WAS INTENT IN MAKING SURE THAT HE HAD THE APPEARANCE OF A FREE MARKET.

I think he did it to get rid of inefficient, money losing companies, to get
money to help Mexico pay its foreign debts and to contribute to a more dynamic
economy.

WHO EXACTLY WERE THE BIG BENEFACTORS OF THIS PRIVATIZATION?

Well there's several billionaires who benefited from the sale of a public
company. Among them Carlos Slim who bought the telephone
company, the television baron, Emilios Caraga who got
licenses of regional television stations. You name it. Virtually all the
people who make up the list of the richest people in Mexico today, almost
all of them were close to the Salinas administration.

THERE WERE A LOT OF QUESTIONS BEING RAISED NOT ONLY TO THE EFFECT OF WHO
BENEFITED, THE FRIENDS OF SALINAS HIMSELF WERE THE
BENEFACTORS, BUT OF THE WHOLE PROCESS. IT WAS DONE RATHER HASTILY, TO SAY THE
LEAST, WASN'T IT?

Some more than others. There were some privatizations that raised a lot of
questions. You just mentioned the telephone companies. A lot of
critics at the time said that the process was apparently clean. But the
telephone company was sold to Carlos Slim and then 3 months
later, the Mexican people found out that the telephone rates went up by
enormous percentages and a lot of critics asked themselves whether there was
not some kind of secret deal whereby Salinas gave - sold the telephone
company to Slim with a secret understanding that Slim would be
allowed to raise telephone rates tremendously a few months later.

AND THIS WAS THE GENERAL VIEW OF -

I think if you look at the privatizations, most of them, you
won't find any flagrant abuses. If there was some hanky-panky, it was behind
the scenes.

LET'S TALK ABOUT THE FAMOUS DINNER. A WHOLE CHAPTER OF YOUR BOOK IS DEVOTED TO
THAT DINNER. IN FEBRUARY '93, SALINAS HELD A
PRIVATE DINNER.

On February 23rd, 1993, there was a secret dinner party at the home of
Antonio Ortiz Mena, an old time government official. All the 30 biggest
businessmen in Mexico, the wealthiest people in Mexico, all men by the way,
arrived in limousines and sat down. They had an idea, but didn't quite exactly
know what they had been summoned for.

AND AMONGST THEM WERE ALL THE PEOPLE THAT BENEFITED FROM
PRIVATIZATION . . .

Among them were, you know, Carlos Slim, Carlos Hank Rohn, Emilio Azcarraga,
all the big businessmen, billionaires as they call them here who in some way or
another, benefited from the privatization of state owned companies. And at the
dinner, they were asked to contribute $25 million each to the upcoming
presidential campaign, $25 million each. That's a lot of money. That made
together about $750 million. It was like way, way, way beyond what any American
president ever got from the private sector or from anybody else and this is
from a country whose economy is about the size of that of the state of Ohio.

AND THE REACTION WAS?

Well eventually the word leaked out and this made a
big, big scandal in Mexico because this was sort of a reflection of how
the system works. This was a secret meeting behind the backs of
the people, and it sort of illustrated the close relationship between some
of the richest people in this country and the government. It was
all done secretly behind the people's back without anybody knowing. And two
or three people who attended that dinner who told me how it went,
gave me the details about it, and explained to me that some people
were very uneasy about it. Some of these rich people said, hey, you know,
should we be in the business of bankrolling the presidential candidate?
But eventually the whole thing came out in the open and the
official word was that the whole thing was, you know, forgotten. But
insiders of the party say that most of them gave money under the table
afterwards.

$25 MILLION.

Each.

IS THIS A DEPARTURE FROM THE PAST -- THIS BEING SO CLOSELY, SO OBVIOUSLY
LINKED TO THE BUSINESS SECTOR?

No there has always been a relationship between the president of Mexico and
the industrial past. But remember for the past 30 or 40
years, Mexican governments claimed to be revolutionary, nationalist and it
wasn't chic to be seen, to be pictured with big businessmen. So
governments kept big business sort of at arm's length. When Salinas takes
office and privatizes 300 state owned companies, suddenly he appears in
photographs with the private sector, it's no longer badly seen to
open up the economy and to mix with big industrialists. All over
the world we are seeing that. So that changed.

AND AGAIN HE'S DOING IT FOR SO-CALLED DEMOCRATIC REASONS IN THE SENSE THAT HE
NO LONGER WANTS HIS PARTY TO BE FUNDED BY GOVERNMENT FUNDS. THAT WAS ONE OF THE
REASONS WASN'T IT?

Well the reason, as it was explained to me by the person who hosted
the dinner, was that they did it for democratic reasons. They
wanted, for the first time in Mexico's history perhaps, to stop the funnel
of money from the government to the ruling party. Traditionally, one of the
reasons the ruling party won almost every election, state, local and
national since the 1920s is that they enjoyed incredible amounts of money
that were funneled under the table from the government. So the
Salinas people said, this has got to end, among other things because now we
have the International Monetary Fund, the World Bank, the U.S. Treasury,
all our creditors looking at our finances so we have to come up
with new ways of funding the ruling party. So they turned to the
industrialists and said, we've got to stop this funneling of money out
from the government into the ruling party, you help us. And they did.

AND AT THE SAME TIME, BECAUSE THEY THINK THEY'RE DOING A GOOD
THING THEY DON'T REALIZE THAT THIS MIGHT CREATE A CONFLICT OF INTEREST. THAT
YOU CAN'T JUST TURN AROUND AND ASK FOR $25 MILLION FROM A COMPANY AND NOT
EXPECT TO HAVE SOME KIND OF FAVOR ASKED FOR IN RETURN.

You see in Mexico, until very recently, there wasn't really a concept of
conflict of interest. It simply didn't exist. It happened to me when I
interviewed some of these billionaires. One of them was the fund raiser
for President Zedillo's campaign, while he was chairman of one of the biggest
companies in Mexico, and I asked him, isn't there something wrong with this?
Won't some people say that if the President gets elected he will owe you a lot
of favors? And he
looked at me sort of with blank eyes and couldn't understand quite what I
meant. Until very recently, there was no concept of conflict of interest
in the Mexican law and if there was, nobody knew about it or paid any
attention to it.

WHAT YOU HAVE DESCRIBED SO FAR IS THAT THE PEOPLE WHO USED TO BE INVOLVED IN
THE INSTITUTIONAL CORRUPTION OF THE PRI --THE BIG BUSINESSMEN WHO WERE TIED TO
IT, THEN WOUND UP WITH THE PRIVATIZED COMPANIES, ALMOST LIKE NOTHING REALLY
CHANGED.

Most of those who benefited from the privatizations were in some way or
another close to the presidential family. That's a fact.

SO WAS IT, IN A WAY, SUBSTITUTING ONE FORM OF CORRUPTION FOR
ANOTHER?

No because don't forget that by giving - passing on these companies to the
private sector, the state was getting rid of money losing operations. So I
think in Salinas's mind he thought, okay I better give this company to
so and so because the company keeps losing money, and then it becomes his
problem not mine. So I don't think he implemented that part of his economic
plan
out of any greed or corruption. We may learn - let me ...

THE DESCRIPTION IS THAT GONZALES, MINISTER OF TOURISM, BECOMES A BILLIONAIRE
WHILE HE'S IN GOVERNMENT. HE'S THE OLD STYLE GUY. BUT WHEN PRIVATIZATION COMES,
HIS SON STARTS BUYING UP PRIVATIZED COMPANIES. IT SOUNDS LIKE THE SAME
SYSTEM.

Well Salinas didn't change the basis of the system which is that
there are no rules of conflict of interest, very little
accountability and very little focus on corrupt practices. He didn't do
that.

NOR DID HE APPARENTLY STOP HIS BROTHER FROM TAKING ADVANTAGE OF PRIVATIZATION.
WHAT WAS HIS BROTHER'S ROLE IN ALL OF THIS?

It was an open secret in Mexico that Raul was in cahoots with many of the
private sector businessmen, that he was engaged in influence
peddling, and was friends with business people who eventually got government
contracts. Raul Salinas was known at the time, at least in political
circles, in business circles, as Mr. Ten Percent.

WHAT WAS THE SIGNIFICANCE OF THE ARREST OF RAUL SALINAS AFTER CARLOS LEFT
OFFICE?

The arrest of Raul Salinas opened up the window to something everybody
knew but nobody could put his finger on which was the institutionalized
corruption in government circles in this country. Until the arrest of Raul
Salinas, it was an open secret to everybody that every president of
Mexico since the days of the revolution, ended up incredibly rich, that their
families ended up with lots of money etc. etc. It was an open secret but it was
sort of
a fact of life. Nobody had ever seen a check, nobody had ever seen a
cable, nobody had ever seen evidence of that happening. When Raul Salinas was
arrested, suddenly the Mexican people woke up and read in the papers that he
had an $84 million bank account in Switzerland. They saw copies of the wire
transfers. They saw that he had a $23 million bank account in London and people
began to say, holy cow, how come? This was the first time that they saw that in
black and white. So it created a shock in
Mexico. For the first time, the Mexican people could face, could see in black
and white, evidence of corruption within their ruling elite.

.... you've got to remember when it happened, Raul Salinas was arrested in
February 1995. This was only two months after the worst depression in Mexico's
history, no matter
what economists on Wall Street will call it. It was a huge
depression. Mexico's economy sank by 7%.

SEVEN PERCENT?

7% in 1995. That's the worst year since the Mexican Revolution. So
here you have a massive devaluation of the peso in December 1994.

WHEN YOU SAY THE ECONOMY SLIPPED 7% AND THAT IS A MASSIVE DEVALUATION, GIVE ME
AN EXAMPLE OF WHAT THAT MEANS.

If an average Mexican on December 20, 1994, had 10 pesos in his
pocket, a week later or two weeks later he had half of that or less. The
money suddenly wasn't worth anything. And here you have the worst economic
depression in this country's recent history. Tens of thousands of -
millions of people, over the next year it would be more than one million
people, were laid off from their jobs. For rent signs were all over Mexico
City. I remember walking on the streets in December and January and
suddenly seeing for rent, for rent, businesses going under. And two months
later in the midst of this incredible depression, Mexicans wake up and
read in the papers that they've found $84 million in the
ex-president's brother's bank accounts in Switzerland. And then the
next day they find out that another $23 million was found in Britain and
another 30 million in France and on and on and on. And people
just were flabbergasted.

HOW DID HE GET THE MONEY?

He got the money from leading industrialists in Mexico who are, some more
than others, very close to the ruling party. One of them, Carlos
Peralta, gave him $50 in 2 or 3 or 4 installments, through U.S. banks, by the
way. Others were Carlos Hank . . .

CARLOS PERALTA GAVE HIM HOW MUCH
MONEY, THROUGH WHAT U.S. BANK, AND WHY?

Carlos Peralta transferred about $50 million in four installments through
various U.S. banks mainly Citibank in New York over a couple
of months in - I don't remember what year.

WHY?

When I found that out and I called Carlos Peralta on the phone
he told me that it was not a bribe, not a pay-off for anything but money he
had given Raul Salinas to invest in a fund, an investment fund
that Raul Salinas was setting up in Switzerland with several other
friendly businessmen.

WAS THIS A PARTNERSHIP? I MEAN DID HE HAVE A CORPORATION? WAS THERE A NAME?

Carlos Peralta says, and Raul Salinas says that it was
a fund that both of them and several other friends were setting
up and Raul Salinas was managing for a later investment in
various enterprises allegedly in Mexico. Now the question is why would a
smart, intelligent, successful businessman like Carlos Peralta and the
others give that kind of money to somebody who didn't have any experience
in managing money. It should be the other way around.

DID THEY HAVE A WRITTEN AGREEMENT?

They didn't have a written agreement.

DID HE HAVE A RECEIPT?

He said he didn't have a written receipt. Carlos Peralta says that
it was a gentleman's agreement, that the money was given to
Raul for an investment fund and friends are friends.

WHO ELSE GAVE RAUL MONEY?

According to Mexican investigators, the other people who gave money to
Raul Salinas were Carlos Hank Rohn

WHO IS CARLOS HANK ROHN?

Carlos Hank Rohn is the son of Carlos Hank Gonzales, one of the legends of
this country's political system. A very charming man, a very smart politician
who has been in various government jobs for the past 30 years
and whose latest job was agriculture minister for Carlos Salinas.

SO WHAT DOES HE DO, AND HOW MUCH MONEY DID HE GIVE?

Carlos Hank Rohn, according to people who were at that party,
participated at the dinner where the ruling party raised $25 million from
each of the 30 richest people in Mexico.

AND HE GAVE RAUL MONEY FOR HIS PRIVATE BANK ACCOUNT AS WELL?

What Mexican investigators have said and to the best of my
knowledge, Carlos Hank Rohn has not denied, is that he contributed
$15 million to this alleged investment fund that Raul Salinas was setting up in
Switzerland.

AND AGAIN NO RECEIPT, NO AGREEMENT THAT WE KNOW OF.

According to investigators, no receipt, no nothing.

AND WHAT DID CARLOS HANK ROHN GET FROM PRIVATIZATION?

I can't remember.

HE GOT A COUPLE OF PRIVATIZED BANKS. WHO ELSE INVESTED IN THIS INVESTMENT FUND
IN SWITZERLAND?

Ricardo Salinas Pliego, owner of the second largest television network in
Mexico; Adrian Sada, a leading industrialist; Carlos Hank Rohn, and others who
say they were asked to contribute money such as Roberto Gonzales, the owner
of Maseca but who as I understand it says he was asked but never
contributed to the fund.

SO THIS IS A LITTLE STRANGE ISN'T IT?

It's very weird when you see these very successful businessmen,
billionaires, giving their money to a presidential brother who doesn't
have much experience in business affairs to manage it. It should
be the other way around. These people are consummate businessmen. They know
more than Raul Salinas or any of us, about how to turn money into
more money. Why would they have to send money to Raul Salinas for him to
manage their money?

THE U.S. AMBASSADOR TOLD US, LOOK, ALL PRESIDENTS HAVE PROBLEMS WITH THEIR
BROTHERS. NIXON HAD PROBLEMS; JIMMY CARTER'S BROTHER.

IS THIS SIMILAR?

Well you see, the U.S. government, and this goes both for the
Republican and Democratic administrations, has a tendency to turn a blind
eye on anything that sounds bad about Mexico. It's a see no
evil, hear no evil attitude which in the end hurts America and hurts
Mexico.

SO COULD YOU PUT THAT ANSWER IN CONTEXT?

This is on a different scale than anything we would have seen in the United
States is what you're saying, as far as we know.

YOU MENTIONED CARLOS HANK GONZALES. WHO IS HE?
SOME PEOPLE SAY HE'S THE PROTOTYPE OF WHAT?

Carlos Hank Gonzales is seen in Mexico as the symbol of the old system, of
the authoritarian system that people would like to change. He's
a man who was, as he himself told me, was born poor, never inherited a
penny, worked all his life in the state government sector. He never
worked in the private sector and according to Forbes magazine
ended up with a fortune of $1.6 billion. Now you have to
remember the culture in Mexico. For all we know he may not have done
anything illegal because in Mexico there's no law, at least there wasn't any
law during his years in government, prohibiting influence peddling or
stating rules against conflict of interest.

OR MONEY LAUNDERING.

We don't know.

BUT I MEAN THERE WAS NO LAW AGAINST IT IN MEXICO.

There was no law against money laundering.

YOU SAY THAT RAUL SALINAS WAS --IS "BAGMAN" THE RIGHT WORD -- THE CORRUPT SIDE
OF THE SALINAS FAMILY DURING THE REGIME, RIGHT?

Right.

WHEN WAS IT PUBLIC KNOWLEDGE IN MEXICO AND WHEN WOULD THE
U.S. GOVERNMENT HAVE KNOWN ABOUT IT?

This was known as early as 1991. There were stories in the Mexican
press. There was a story in the Mexican press in June 1991 saying
that Raul Salinas was involved in some dirty deal at the Mexico
City racetrack. Then a year later in 1992 there were several stories
in the magazine Proceso, even in the L.A. Times. On the other
hand, U.S. embassy officials who were at the U.S. embassy at the time
tell me that they had discussed within embassy meetings the
fact that Raul Salinas was involved in shady businesses. And
then in 1992, Raul Salinas was quietly sent into exile into California with
some kind of a fellowship which everybody in Mexico knew at the time was
the president's way of sort of keeping him away.

SO -

It was known at the time that Raul Salinas was involved in
shady business deals.

SO WHEN A CITIBANK VICE-PRESIDENT WHO IS IN CHARGE OF MEXICO, AND SPECIFICALLY
RAUL SALINAS'S ACCOUNT, SAYS THAT SHE DIDN'T NEED TO CHECK ON THE ORIGIN OF THE
MONEY BECAUSE IT WAS LIKE MONEY FROM THE
ROCKEFELLERS, IS THAT BELIEVABLE?

Nobody could have said in 1993 or 1994 that it was a surprise to him or
her that there were allegations of corruption's against Raul Salinas. If
somebody did that, he or she turned a blind eye to reality
because in Mexico City the only thing you had to do is to you know, go out,
and have a coffee with any politician, any diplomat, or read the press. It
was
all there.

AND YOU SAY THE U.S. GOVERNMENT KNEW? THE AMBASSADOR ACTUALLY TOLD US THAT HE
EVEN HAD INFORMATION ABOUT RAUL BEING TIED UP WITH DRUG MONEY.

I think there is a see no evil, hear no evil policy
towards Mexico that in the end hurts the U.S. and hurts Mexico.

WHAT WAS CITIBANK'S ROLE IN THE RAUL SALINAS SAGA?

Citibank acted as Raul Salinas's private banker. According to
investigators, Citibank took Raul Salinas's money and helped him invest it
in foreign trust funds all over the world. So they basically acted as his
private banker and . . .

CITIBANK TOOK HIS MONEY BUT THIS WAS NOT A NORMAL TRANSACTION, IT IS NOT LIKE
HE WENT INTO THE BANK HERE IN MEXICO CITY AND HE SAID HERE'S MY MONEY, INVEST
IT FOR ME. WHAT HAPPENED? DID HE OPEN A BANK ACCOUNT AT CITIBANK IN MEXICO
CITY?

Raul Salinas was introduced to Citibank by a close
friend of his, Carlos Hank Rohn who tells him they will show you the way to
hide your money in foreign bank accounts which is, by the way, a normal
practice for businessmen all over the world. Except that banks have in their
guidelines policies about not to taking money from politicians or members of
political families, not to take large sums of money from them.

IT'S NOT UNUSUAL FOR A
MEXICAN POLITICIAN OR A WEALTHY MEXICAN TO GO TO CITIBANK IS IT?

Citibank has a long, long relationship with Mexico. It was the first
foreign bank in Mexico, the most successful one, the one that survived
several administrations where other foreign banks were kicked
out of Mexico and a lot of Mexican industrialists and, according to what
you hear in political circles, a lot of Mexican politicians had
bank accounts at Citibank. After the whole story broke out we learned that
several
of them had bank accounts at Citibank.

SO CARLOS HANK ROHN--WHO GAVE RAUL SOME OF THE MONEY THAT
HE'S GOING TO GET, WHO IS PART OF THIS POWERFUL FAMILY--TOOK RAUL
TO CITIBANK TO, YOU SAY, TO HIDE THIS MONEY. HOW DOES CITIBANK DO THAT FOR HIM
AND WHY?

Well Raul Salinas, from what investigators tell me, told Citibank
that like many other wealthy Mexican businessmen he was worried about
kidnappings, and government persecutions in later years etc. etc. And because
he didn't want anybody to find out that the brother of a former Mexican
president had hundreds of millions dollars in foreign bank accounts he needed a
safe place to keep his money . So Citibank set up trust funds in Switzerland,
in London, and in several other places that would basically hide his name under
several layers of secrecy.

HOW DID THEY MOVE THE MONEY?

According to Mexican investigators, a woman who later they say
turned out to be Raul Salinas's wife, took checks to a Mexico
City brokerage house which in turn transferred the money to New York where
the money was sent to Swiss, British, and other European bank
accounts.

SO THIS WASN'T DONE OPENLY. THIS WAS DONE -

This was done secretly.

DO YOU BELIEVE THAT RAUL SALINAS REALLY IS BEHIND THE MURDER OF FRANCISCO RUIZ
MASSIEU?

No.

SO THEN WHAT - WHERE DO ALL THESE PSYCHICS COME FROM,
THESE MISTRESSES WHO SAY THEY HEARD THESE THINGS, THESE BODIES THAT NO ONE IS
CLEAR WHAT BACKYARD THEY CAME FROM. WHAT'S THIS ALL ABOUT?

This is part of a judicial system that the Mexican president
will be the first to admit has been doing awkward, dubious, shady things
forever. The tradition in Mexico is for a prosecutor if he's convinced that his
witness is telling what
is true, to go out of his way to, you know, produce evidence to prove his
case. Over the two years that I've been following this story it has changed 5
times. So the conclusion is that you can't believe anybody. You can only
believe the basics where all
sides agree and you have to narrow them down to 1 or 2 little things and
make your judgment from those.

THE ARREST OF RAUL SALINAS HAS GIVEN US A SORT OF WINDOW INTO ALL THESE
INVESTIGATIONS. TODAY THE PROSECUTORS HAVE BEEN FIRED. IN FACT, THE PROSECUTOR
MAY IN FACT BE PROSECUTED. WHAT'S GOING ON?

This is a game of shadows, you know. You never see the real thing. You see
the shadows on the wall. Today's heroes are tomorrow's villains.
Tomorrow's villains are yesterday's heroes. What's clear in this story,
what seems to be clear, what everybody agrees on so far is that
the people they arrested after the murder of Jose Francisco Ruiz Massieu,
have
named Raul Salinas. That seems to be a fact.

OKAY.

It also seems to be a fact that Raul Salinas was very close to
the man who hired the gunman to kill Jose Francisco Ruiz Massieu. Those two
seem to be facts. From that point on, it's a comedy of errors.

NOW WHAT ABOUT THE MONEY? IS IT CLEAR THAT RAUL ACTUALLY GOT THE MONEY?

It's a fact that Raul Salinas has --even if everything else is fantasy--
it is a fact that Raul Salinas has $100 million in Switzerland,
$23 million in London, maybe $30 million in France, $5 million in
Canada and who knows how much he has in dozens of U.S. bank accounts
all over the U.S. That's a fact.

IN MEXICO THIS WHOLE COMEDY OF ERRORS, THAT SURROUNDS THE MURDER INVESTIGATION,
THIS THEATER OF THE ABSURD THAT SEEMS TO BE GOING ON WITH PSYCHICS AND SO ON,
IT IS UNIQUE. HOW CAN WE UNDERSTAND WHAT IS GOING ON? IT SEEMS SOMETHING LIKE
PLATO'S CAVE.

Mexico is a country of shadows, a country of make-believe. This
system has a long history of misinformation. It's not like in some
totalitarian regimes where the government doesn't put out information. It's
the contrary. They flood you with information, so much so that by the end
there's no telling what's true and what's not -- where the people are, who
they're
supposed to be, whether they're acting for the reasons they claim to be
acting.

IT'S A MYSTERY INSIDE AN ENIGMA.

It's - it's a country where things are not what they seem to be. Until they set
a system
in place with checks and balances and the government's ability
to circulate the information it wants without any accountability, without any
checks, is corrected, it will continue being that way.

YOU SAY THAT THE ARREST OF RAUL SALINAS WAS A WATERSHED IF YOU WILL, A TRAUMA
IN THE HISTORY OF MEXICO. WHAT
HAPPENED AROUND THAT ARREST?

It was a very dramatic scene because in those days and we should give
credit to the government, to the current government for having done that.
It was mind boggling that the system would turn against one of its own. And
what happened was that the attorney-general went to the president,
according to the attorney-general's account of the story, and he said Mr.
President, we have reason to believe that Raul Salinas murdered
this person. And President Zedillo said, well, do whatever the law
commands. So the attorney-general sent his troops to
arrest Raul at his sister's home here in Mexico City. And then Raul
Salinas called his brother's bodyguards and told them, you know,
they're coming to arrest me. And for a while, for 10 minutes or 20
minutes that day you had two armies, the new government's army
and the old government's army rushing to the place where Raul
Salinas was staying and for a couple of minutes it seemed like there was going
to be a clash between the old government and the new government, who by the way
belonged to the same party and to the same political elite. And in the end,
the
orders came from the presidential house saying there's a formal arrest
warrant against Raul Salinas. And Carlos Salinas's bodyguards
turned back and went home. It was a watershed moment in
Mexico's history because although previously there had been big names, big
politicians arrested, the head of the oil workers union, former
president of the oil company, etc. etc., this was a member of the
presidential family in a country where the president used to be a king.
This was a big deal.

TODAY, GIVEN EVERYTHING THAT'S GONE ON SINCE THEN, WHAT'S THE
FUTURE LOOK LIKE IN THIS COUNTRY?

There's no question that
Mexico is a more open, a more democratic country than it was 10 or 15 years
ago
and there's no question that in recent years both under
President Salinas and President Zedillo there have been important democratic
reforms. However, the problem is that you still have an authoritarian
democracy in place. You still don't have a level playing field for
opposition parties to win the presidency. It's a daily struggle. One day it
looks like the forces of evil are winning. The next day it looks like the
good guys are winning. The trouble I see today is that we're
building a whole new house of cards on very shaky political ground.
In 1997 we are seeing a young U.S. educated Mexican
president, very well intentioned, talking about democratization.
We see the American president praising him, we see Wall Street praising him, we
see the American press praising him. We see investors coming back to Mexico
investing billions of dollars into Mexico. We see the Mexican stock market go
up, we see brokers on Wall
Street saying how great Mexico is and telling their customers to invest in
Mexico and we are seeing that some important political reforms
are not being carried out. So I'm afraid that the danger now is that
President Zedillo may make the same mistake President Salinas made
3 years ago which was putting off political reforms until the economy gets
better. And what I'm afraid of is that if he doesn't do the political reforms
in the 3 years he has left in office this whole new house of cards will
collapse just as it did in 1994.

BEFORE YOU WERE TALKING ABOUT SHADOWS AND THINGS. I ASSUME YOU WERE TALKING
ABOUT ALL THESE MURDERS, I MEAN YOU'VE GOT A DEAD COLOSIO, YOU'VE GOT A DEAD
CARDINAL, YOU'VE GOT A DEAD HEAD OF THE PRI AND YOU'RE NOT SURE WHO'S DONE WHAT
TO WHOM AND WHEN.

Look at the investigation, first it was a lone gun man. Then the
government said it was a conspiracy of three gun men. Then it was four gun
men, then it was back to one. This is a country of shadows.

You know, putting the whole thing in perspective.
What you are seeing here every six years or so is a government with very
little accountability spending more than it should, and going
bankrupt, going to America or to Canada or to the Europeans begging for
money, being told that to get the money they have to impose drastic
economic reforms, and then a new president takes office, promises to
release economic reforms, does them, but does not do the
political reforms necessary and then the system goes on, they spend more
than they should, they go bankrupt and it's the same story over and over.
So until they implement a system of checks and balances with
real accountability, this story will repeat itself . . .

BUT HOW CAN THEY DO THAT IF THE PRESIDENTIAL CANDIDATE GETS
ASSASSINATED, THE CARDINAL IN A MAJOR CITY GETS ASSASSINATED,
THE HEAD OF THE RULING POLITICAL PARTY GETS ASSASSINATED, EVERY POLICE
COMMANDER AND PROSECUTOR WHO TRIES TO GO AFTER A NOTORIOUS DRUG CARTEL GETS
ASSASSINATED IN BROAD DAYLIGHT, AND THE GOVERNMENT DOESN'T SEEM TO BE ABLE TO
DO ANYTHING?

Because that may be a system of the transition Mexico is going through.
What you're seeing now, all these murders you're talking about, this is not
Mexico 1910, this is Chicago 1930. What I mean by that is that it's not
a revolution, what you're seeing here in Mexico is not a
people's uprising against the government, that's not happening, I don't think
it will happen. What you're seeing is a fight among families or tribes
or clans within the ruling elite that are fighting among one
another for a shrinking piece of the political pie they used to have.
So it's not the Mexican revolution of 1910, this violence we are
seeing here is not a people's uprising -- it's a bloody fight among
political mafias who were then the ruling elite that are fighting one
another for a shrinking political and economic pie. And that's good in a
sense...

IT'S GOOD?

It's a symptom that they're losing power, so what we are now seeing, the
violence and the bloodshed and death --what makes the headlines and the stuff
we are
writing about and everybody's focusing on--is a symptom of a healthy
change Mexico is undergoing, because these people are losing
power. Otherwise they wouldn't be fighting to keep the shreds of it. Is
that clear?

DO YOU THINK THE PAN IS GOING TO WIN - AND WHAT WILL IT MEAN FOR MEXICO IF
THEY DO?

I think there's a chance they could win the capital but I
don't think they're going to allow them to win the congress, because you
see congress is the one that has committees that look into
corruption and . . . and you know, government secret funding for the ruling
party etc. etc., so I think they'll win Mexico City but not congress.

AND WHAT DOES THAT MEAN, WINNING MEXICO CITY?

It means two things, winning the biggest political job in Mexico
after the presidency and sort of creating a candidate for the
year 2000, or making their job level so difficult that it'll be
an embarrassment for the PAN for the year 2000. Maybe the PRI will allow
the PAN to win in order to embarrass their win because it is an impossible
job.

WHAT DID CARLOS SALINAS ACHIEVE IN YOUR MIND THAT IS STILL STANDING AND
POSITIVE TODAY?

On the positive side, for the first time in Mexico's history he allowed for
some states to go to the opposition party. He opened up the economy. He sort
of ended the old-time taboos that trading with the U.S. was bad or was against
nationalism and that sort of thing. And he put in writing what was already an
existing fact.

More than 90% of Mexico's foreign trade before NAFTA was with
the U.S. So what it did was institutionalize a situation that
was already there but by doing that he brought greater confidence to
foreign investors.

AND ON THE NEGATIVE SIDE?

Well Salinas failed to do the basic economic reforms that would
have helped Mexico to become a more efficient, open economy. Let me explain
this. You privatize state owned companies, you invite foreign investors.
You get headlines all over the world that Mexico is opening up. But at
the same time, you have an authoritarian system where there was no
accountability. So for instance, the government issued statistics,
financial statistics, and there was no way of knowing whether
they were right or wrong because there was no independent auditing
commission in Congress, let's say, to look at the government figures.
Congress was, and continues to be, in the hands of the ruling party. The
central
bank was managed like a puppet by the central government so the
elections were you know if not heavily fraudulent, I mean not
that fair--or at least the process leading towards the election. So you had
a government that functioned without accountability. So it's very hard to
build an open economy without a system of checks and balances
where investors can know where they put their money and what the real
figures are. And basically that's what Salinas did. He opened up
the economy without creating a system of checks and balances in a
democratic system that would have allowed people to know what the real
situation was and that would have helped prevent the economic collapse
of 1994.